Banking shares help give FTSE a 100 point boost

A sparkling day for the banking sector has outweighed worries about cash calls from mining companies, giving London's leading index a rise of more than 100 points for the second time this week.

UK banks were in demand first thing after an upbeat note on Lloyds Banking Group, and were later supported by hopes that Barack Obama's $825bn financial package would boost the US economy and indeed the whole financial system. An opening rise of more than 100 points on Wall Street ahead of the latest Federal Reserve meeting also helped sentiment.

Lloyds ended as the day's biggest riser in the FTSE 100, up 33.8p to 100.9p as Citigroup - the bank's house broker - moved from hold to buy and set a 120p target. Citi estimated that Lloyds might need to raise another £3bn to boost its capital ratios to adequate levels, but added that fears of a full nationalisation were overdone.

Other banks also benefited, with Royal Bank of Scotland rising 5.6p to 21.3p, Barclays 17p better at 107p and HSBC 51.75p higher at 583p.

Overall the FTSE 100 closed 100.79 points higher at 4295.20, despite falls among miners. Xstrata lost 62p to 623p on talk it might be considering a rights issue, while Rio Tinto dropped 24p to £16.15 after it confirmed a cash call was one option to help reduce its debt by $10bn this year. Numis said: "[This confirmation] contrasts with previous commentary that the group had no plans to raise equity" and suggested a 1 for 3 rights issue at a 20% discount to the current price to raise $8bn.

Another faller was Tate & Lyle, down 8.5p to 344p after the sugar and sweeteners group warned of flat profits, mainly because of problems at its US ethanol and starches business. Panmure Gordon said:

"While Tate has no major refinancing until June 2011, the market is averse to highly indebted companies [Tate has borrowings of around £1.5bn] and with various trading issues in the business we see no reason to hold the stock at the moment."

Investment group 3i fell 3.5p to 251.25p as it announced the departure of chief executive Philip Yea alongside a 21% fall in the value of its top 50 investments.

Pubs group Greene King climbed 69.25p to 421p after it reported better than expected Christmas sales. Telecoms testing group Spirent added 5.75p to 40p, lifted by a positive recommendation from Cazenove. The broker moved from underperform to in-line, saying:

"Spirent might be impacted by the sharp decline in mobile phone sales in the first half, leading to push outs of equipment sales in the mobile phone testing equipment space. However, the weaker pound provides so much tailwind at the current level that we are upgrading our forecasts for 2009."

Housebuilder Taylor Wimpey also benefited from an upgrade, with Panmure Gordon moving from sell to hold. Its shares closed 0.25p higher at 15.5p.

Lower down the market Immunodiagnostic Holdings added 4p to 127.5p after a positive update on a key product, its iSys automated testing system. Both Daniel Stewart and Teathers issued buy notes on the company.

Finally CustomVis, the laser eye equipment specialist, climbed 0.14p to 0.43p after an overhang of shares - believed to have been held by institutions that have been holding stock since the company floated in 2003 - was removed. A 10% block of shares was picked up by market maker Winterflood Securities, which has been placing them in the market.